Axsome Therapeutics (AXSM -3.84%), a clinical-stage biotech, found some form of redemption last month. The drugmaker's shares gained a respectable 18.8% over the course of September, according to data provided by S&P Global Market Intelligence.
Through the first eight months of 2021, Axsome's shares were down by a jaw-dropping 68%. The drugmaker's stock has sold off this year mainly in response to the regulatory delays for its major depressive disorder medication AXS-05.
In early August, the Food and Drug Administration informed the company that the drug's labeling and post-marketing requirements could not be discussed at this time due to deficiencies in the regulatory filing. On Aug. 23, however, the FDA told Axsome it would not meet the drug's scheduled Prescription Drug User Fee Act (PDUFA) target action date previously scheduled for Aug. 22.
With no news on the AXS-05 front in the past month, investors appear to be warming up to the idea that these deficiencies may not sink the drug's regulatory filing. What's more likely, though, is that the FDA is simply busy with COVID-19 related matters. This year has been a tough one for new drug applications -- especially ones outside of the realm of COVID-19. The fact of that matter is that the agency is probably overwhelmed at the moment, and regular business like combing through a dense regulatory application is taking a back seat to the pandemic.
On the bright side, Axsome did note last month that the FDA formally accepted the regulatory filing for the company's experimental migraine medication known as AXS-07. The agency reportedly set April 30, 2022 as the drug's target review date. AXS-07 isn't expected to a big a big seller. But Wall Street thinks it can likely haul in at least $300 million per year at peak.
Is Axsome's stock a buy right now? Personally, I think it is best to wait for the regulatory fate of AXS-05 to become a known quantity. If the FDA rejects the drug for little more than clerical reasons, however, I will likely be a buyer of this stock on any weakness. After all, it is fairly common for developmental biotechs to make minor errors on regulatory filings. That's not to say that this delay will definitely boil down to an easily fixable typo or missing paperwork. But it also wouldn't be unheard of, either. That's why I will have this small-cap biotech stock on my radar this month.